A BIOECONOMIC APPROACH TO THE FAUSTMANN–HARTMAN MODEL: ECOLOGICAL INTERACTIONS IN MANAGED FOREST

Abstract This paper develops a bioeconomic forestry model that makes it possible to take ecosystem services that are independent of the age structure of trees into account. We derive the Faustmann–Hartman optimal harvesting strategy as a special case. The bioeconomic model is then extended to account for the fact that forest harvesting decisions impact on other ecological resources, which provide benefits for the wider community. The paper focuses on impacts associated with disturbance caused by logging operations and habitat destruction due to tree removal. This enables us to explore the interactions between forest management and the dynamics of ecological resources. The optimal rotation rule is obtained as a variation on the traditional Faustmann–Hartman equation, where an additional term captures the potential benefits derived from the growth of the ecological resource valued at its shadow price. The steady‐state solutions to the problem and sensitivity to model parameter are identified using numerical analysis.